President Donald Trump said Saturday that he had received assurances from King Salman of Saudi Arabia that the kingdom will increase oil production, “maybe up to 2,000,000 barrels” in response to turmoil in Iran and Venezuela. Saudi Arabia acknowledged the call took place, but mentioned no production targets.
Trump wrote on Twitter that he had asked the king in a phone call to increase oil production “to make up the difference…Prices to (sic) high! He has agreed!”
A little over an hour later, the state-run Saudi Press Agency reported on the call, but offered few details.
“During the call, the two leaders stressed the need to make efforts to maintain the stability of oil markets and the growth of the global economy,” the statement said.
It added that there also was an understanding that oil-producing countries would need “to compensate for any potential shortage of supplies.” It did not elaborate.
Oil prices have edged higher as the Trump administration has pushed allies to end all purchases of oil from Iran following the U.S. pulling out of the nuclear deal between Tehran and world powers. Oil prices also have risen with the ongoing unrest in Venezuela, as well as with fighting in Libya over control of that country’s oil infrastructure.
Last week, members of the Organization of the Petroleum Exporting Countries cartel led by Saudi Arabia and non-cartel members agreed to pump 1 million barrels more crude oil per day, a move that should help contain the recent rise in global energy prices. However, summer months in the U.S. usually lead to increased demand for oil, pushing up the price of gasoline in a midterm election year. A gallon of regular gasoline sold on average in the U.S. for $2.85, up from $2.23 a gallon last year, according to AAA.
Trump is trying to exert maximum pressure on Iran while at the same time not upsetting potential U.S. midterm voters with higher gas prices, said Antoine Halff, a Columbia University researcher and former chief oil analyst for the International Energy Agency.
“The Trump support base is probably the part of the U.S. electorate that will be the most sensitive to an increase in U.S. gasoline prices,” Halff said.
Trump’s comments came Saturday as global financial markets were closed. Brent crude stood at $79.42 a barrel, while U.S. benchmark crude was at $74.15.
Saudi Arabia currently produces some 10 million barrels of crude oil a day. Its record is 10.72 million barrels a day. Trump’s tweet offered no timeframe for the additional 2 million barrels _ whether that meant per day or per month.
However, Saudi Aramco CEO Amin Nasser told journalists in India on Monday that the state oil company has spare capacity of 2 million barrels of oil a day. That was after Saudi Energy Minister Khalid al-Falih said the kingdom would honour the OPEC decision to stick to a 1-million-barrel increase.
“Saudi Arabia obviously can deliver as much as the market would need, but we’re going to be respectful of the 1-million-barrel cap _ and at the same time be respectful of allocating some of that to countries that deliver it,” al-Falih said then.
The Trump administration has been counting on Saudi Arabia and other OPEC members to supply enough oil to offset the lost Iranian exports and prevent oil prices from rising sharply. But broadcasting its requests on Twitter with a number that stretches credibility opens a new chapter in U.S.-Saudi relations, Halff said.
“Saudis are used to U.S. requests for oil,” Halff said. “They’re not used to this kind of public messaging. I think the difficulty for them is to distinguish what is a real ask from what is public posturing.”
The administration has threatened close allies such as South Korea with sanctions if they don’t cut off Iranian imports by early November. South Korea accounted for 14 per cent of Iran’s oil exports last year, according to the U.S. Energy Department.
China is the largest importer of Iranian oil with 24 per cent, followed by India with 18 per cent. Turkey stood at 9 per cent and Italy at 7 per cent.
The State Department has said it expects the “vast majority” of countries will comply with the U.S. request.